If You Want FIRE, Know And Control The Burn

Well, there are a lot of things you have to commit to in order to make that happen.

One thing you must do is, be totally aware of every single dollar coming in and going out if you ever want to become financially independent.

You must track every single penny of income and expenses – and you should be able to rattle off your savings rate right off the top of your head.

You should know, exactly, how much money you’re spending.

Said another way, you must know your burn rate.

More importantly, you must control your burn rate, keeping it as low as possible. You should be trying every trick in the book to keep those expenses as low as possible.

But in order to control that burn rate, and keep it low, you must know it inside and out.

If you want FIRE, you must know and control the burn.

If you don’t know and control the burn, you won’t have FIRE.

That is practically guaranteed.

Known Income, Unknown Expenses

I had a job in the auto industry for about eight years, working as a service advisor.

Getting to know your co-workers involves, at some point, discussing money a bit.

My discussion of money in a greater sense and at a greater scale has obviously occurred through the process of writing more than 1,000 articles anda best-selling bookabout saving, investing, and achieving financial independence.

And coaching individuals on their way to FIRE has enhanced this familiarity even further.

What I’ve come to realize is that people, perhaps particularly Americans, are very familiar with their income.

They probably know, almost down to the penny, how much they’re making. If you ask, in confidence, an average American what their last paycheck was, they can probably tell you that. Even asking them how much money they made last year – over an entire year – will likely result in a fairly accurate answer.

I remember my fellow service advisors being very familiar with what their running total of sales was for the month, which would go on to impact their paychecks (we were paid on commission). They’d run these reports daily (sometimes more than once per day). Believe me, they knew full well how much money they were making.

But asking people – almost anyone – how much money they’re spending, exactly, results in a series of “umms” and “hmms”, followed by guesses and roundabout numbers.

We’re not even talking an entire year. We’re talking just what someone spent in the last month.

“Well, my mortgage is $X. And I think I’m probably spending $Y on food, maybe. Oh, but that’s not including ATM withdrawals. I spend a few hundred per month on gas? Hmm. Umm. Well. Hmm. Some of my expenses are paid through an automatic bill payment thingie. Umm. My bank takes care of a lot of this, I think.”

Nope. You take care of this.

At least, you’re supposed to.

If you don’t know and control your burn rate, folks, you’ll never have FIRE.

Track Every Single Penny

You can’t know your burn without tracking every single penny of expenses.

This is absolutely necessary to becoming FIRE.

If you don’t know your expenses, exactly, down to the very last penny, you can’t possibly hope to control/lower them.

Knowing your savings rate is like a having a road map to financial independence. Not knowing expenses, and thus not knowing your savings rate, is like taking a trip to a destination without knowing what direction you’re traveling in or even what speed you’re traveling at. It’s almost impossible.

I’ve been tracking every single penny of expenses for around eight years now.

I would load up my accounts on Mintand Personal Capitaland see every single penny of income and expenses, along with every single penny of assets and liabilities. I can recite right off the top of my head what I’m making and spending, along with every penny of what I own and where it’s at.

(By the way, I was honored to have been asked by Mint to be interviewed by them a few years back. You can check out that interview here.)

Even today, I still track every single penny.

When I go to the market at night with Oh and spend, say, 150 baht on dinner, I track that and input that data in my account when I get home later that night.

I do this every day.

I simply convert expenses to dollars using that day’s exchange rate, since I live in Thailand and spend in Thai baht.

I know my burn rate.

And then I’m able to control it.

Control The Burn

Controlling the burn rate – a.k.a. keeping your monthly expenses as low as functionally possible – is important for three different but complementary and holistically valuable reasons.

First, the less money you spend, the more money you have to save and invest.

The more money you can invest, the faster you can build a portfolio of assets that generate the passive income you need to live off of.

I was able to become FIRE in six years because I was able to maintain a very high savings rate – I hit a monthly savings rate over 70% many times – and routinely save/invest a lot of money, building my FIRE Fund very quickly in the process.

Second, the less money you spend, the less passive income you need in order to become FIRE.

The less money you spend, the faster you can become FIRE. That’s because you simply need a smaller portfolio, and thus less passive income, to cover your bills.

Plus, it will be far easier to stay FIRE when you don’t have a huge monthly burn that needs constant gasoline to keep lit.

I was able to save and invest a lot of money very quickly because of my low burn rate.

Likewise, and just as importantly, I was able to quit my job so young (age 32) and become FIRE at a young age (age 33) because I never required a lot of passive income in the first place, which was due to a low-maintenance lifestyle that never needed a lot of money to sustain.

I currently spend between $1,200 and $1,300 per month in Chiang Mai, Thailand. And I’m happier than I’ve ever been.

I don’t need millions of dollars to sustain myself. I don’t need a giant fire with a ton of gasoline to keep my FIRE alive. And so not only was I able to FIRE quickly, but I’m able to stay FIRE in an easy and sustainable manner.

The less you spend, the more you can save and invest. The less you spend, the less passive income you need. Controlling your monthly burn rate burns the candle from both ends – getting you to FIRE that much faster by virtue of two dynamics working in combination of one another, complementing each other in a very powerful manner.

Third, a small burn creates a happier, less stressful, and more sustainable life.

The more money you spend, the more dependent you are on everything – global consumption, mass consumerism, economic expansion, etc. – in order to keep your huge portfolio and the passive income it’s generating going.

You need that big fire to remain stoked in order for you to remain FIRE.

That’s a lot of stress.

I see this all the time, where even people who quit their jobs in favor of FIRE are constantly worrying about and thinking about money, politics, the economy, their passive income, stocks, and whatever the hell else.

What a terrible retirement, in my opinion.

Why become FIRE if you’d rather actually be on fire?

It’d be more pleasant for me to go back to my crummy old job than sit around all day and stress out about money and whether or not things will hold up for me.

No, thanks. A huge NO to that for me.

Spend less, worry less. Financial freedom is being free even from a lot of spending and passive income.

Being financially free is in and of itself great. But it’s just one degree of freedom. You should aim to be free even of money itself.

As the movie This is 40taught us: “Have a small nut; that’s the key to life.”

If you have a small burn rate every month, you’re pretty carefree and happy. You’re freed up to try things out, have fun, and see what your FIRE looks like.

You have very limited downside, while you also have near-unlimited upside due to the power of the compounding snowball that will roll like crazy for you when it’s not being slowed down by the heat of a big burn.

Meanwhile, spending less gives you an opportunity explore what real happiness looks like.

But having a massive monthly burn can bring about a life that appears to be nothing more than a charred shell. Not only does money not buy happiness, but building a life that functions around a monthly burn that’s too high can, and likely will, burn you up.

Conclusion

Elizabeth Holmes, founder and former CEO of Theranos, currently under indictment for wire fraud, once relayed a story about setting herself on fire (in the figurative sense) during a commencement speech at Pepperdine University.

She stated that over the entry to one of the buildings at the university was a sign that read: “Success is not the result of spontaneous combustion – you must set yourself on fire.”

Well, Holmes probably should have scaled things back a bit.

But what I want to say here is, FIRE is not the result of spontaneous combustion, either – you must know and control the burn. If you want FIRE, pretend like your budget is on fire – every expense is an emergency to attend to.

Track every expense. Lower them as much as you can. Save and invest more. Become FIRE faster.

Then live a pleasant life with little stress. You don’t want to become FIRE only to find out you’d rather be on fire.

What do you think? Do you know and control your burn? Have you found it vital to becoming FIRE?

P.S. If you’re looking for ways to know and control your burn so that you can FIRE faster, easier, and more happily, check out some great resourcesthat personally helped me achieve financial freedom at just 33 years old!

About Jason Fieber

Jason Fieber became financially free at 33 years old through a combination of hard work, frugal living, strategic entrepreneurship, intelligent investing, and geographic arbitrage. He currently lives his early retirement dream life in Thailand. Jason has authored two best-selling books: The Dividend Mantra Way and5 Steps To Retire In 5 Years (also available in paperback).

Reader Interactions

Comments

I control my burn every day. I look at all my accounts every day. Sometimes 2-3 times if I am not doing anything. At the same time I am thinking of ways to make more money so that I can save even more.

Before I figured-out the dividend investing strategy, I tried to do day trade for few days and I made few bucks here and there (luckily). And, I thought making money is easy and spent all the profits for things that I really don’t need.

I had FIRE in my mind, but didn’t have control my money burning hobbit because I didn’t have a defined goal in my mind.

After read a couple of books and blogs (you are one of them-THANK YOU), I figured-out the way to become financially independent. I set a goal, started to track my money and cut my unnecessary spending.

Now I am in the right path and moving forward every single day to become FIRE faster.

I was always frugal, but didn’t start tracking my expense until I was serious about financial independence. Seeing where the money went made a big difference for me. Quite a bit of money went to things that didn’t increase my happiness appreciably. Cutting most of those out didn’t decrease my quality of life and I could save more.

Tracking your expense is one of the first steps to FIRE. Your burn rate is great. Our month expense is much higher. It’s more expensive for a family.

I hear you on the family thing, especially being in Portland. I could make the numbers work in PDX (and I even visited last year to take a look at the city), but it would be an apples-and-oranges lifestyle/opportunities/freedom comparison.

Good point Joe, I am on the same boat as you, I have never tracked my expenses. But I was always frugal and kept an eye on spending . However in the last two years I started to track my monthly expenses which help me understand my living cost and itemized the spending items to cateogories which is crucial for increasing the saving rate.

Agreed, tracking has definitely always been key. I do ours weekly nowadays.

Also keeping the burn nice and small in FIRE means it’s possible to reduce and customize Modified Adjusted Gross Income accordingly in order to stay within the desired Federal Poverty Line parameters to keep you eligible for medical ACA subsidies.

The more income you require to keep that crazy huge inferno going, the more you will wind up paying for medical thereby increasing crazy huge inferno further. Perpetual cycle of lose-lose.

It’s just so much easier to keep a smaller burn, and smaller FIRE, going. No ongoing effort/stress. I’m carefree these days in large part due to my small burn (which is due in large part to relocating abroad).

interesting article – i’d say i agree with most of your points completely. When you want to get financially independent you have to save – it all comes down to the savings rate, no doubt about that. And to save efficiently you have to control your costs. I track all my expenses since 2015 and it saves money, opens eyes etc. – it has become a habit for me and is no effort at all.

But “hardcore” saving is not easy at all times and i think that over the long run you won’t get to Financial Independence with willpower alone. It’s a long journey for most of us and in my opinion it’s very important to make this journey a pleasant one. To have “fun” along the way creates a lot of energy and this leads to long term success.
For me the energy comes from passion for investing (i have other hobbies of course). I love what i do, the research, learning, knowing how the economy works, knowing “my” companies and the steady stream of dividends of course…

I started off tracking my budget fervently, and I agree for someone making the decision to FIRE it is an absolute requirement to start off with. However, once all the changes to your lifestyle have been made and become a habit it is pretty easy to know what you are spending without actually knowing. The longer you have been budgeting, the easier you will know if you are off track. That being said, I don’t think it’s necessary to track so much once you are more established with your habits.

The issue is to make sure you don’t drift though. For example I have recently had a daughter and that brings a new set of expenses i’ve never had before. So I have gone back to budgeting entries every month now until I get more familiar with what a child costs. Then, after a while I will get the knack of how much and budgeting won’t be so important because I will know when I am drifting.

I think that is the benefit of large up front effort. It results in the ability to go automatic mode later on.

Once you set up the habits, they work in your favor for the rest of your life. One of those habits is, of course, the actual tracking of expenses, down to the penny. I still do it, even though I spend a small fraction of my overall income. I find it extremely important because I otherwise simply would not know, exactly, how much I’m spending. And when you don’t know, you don’t know. Makes it very easy to veer of course, even if you might have some kind of approximation in the back of your mind.

It’s just like with anything else in life where you set up those best practices. The moment you stop with the basics, is the moment you start to see reduced benefits. It’s like the guys at the gym who don’t need to warm up, because they’ve been working out for so long. Those are the guys who pull muscles and all that. Get those fundamentals down, then stick with them. 🙂

Couldn’t agree more. The less things people spend money on and own, the less money, time and maintenance they will need. Further, this usually reduces the stress, as there are less things to be concerned about. I also have to agree that – there is no point in being FIRE, if you are actually stressed out more, just in order to monitor every single thing because of the lifestyle the person has. Spend less, want less and live free. I dig it.

One huge benefit of this lifestyle, in my experience thus far, is the much lower stress levels. If you’re entering into it excessively worrying about money/spending, you’re putting yourself at a huge disadvantage in a number of ways. Why become FIRE if you’d rather set yourself on fire (due to stress)? I’d sooner go back to my job than constantly worry about money. FIRE should set you free, not hold you back in that way.

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About Me

I'm Jason Fieber, Mr. Free At 33. I became financially free at 33 years old by working really hard, living well below my means, engaging in strategic entrepreneurship, intelligently investing, and using geographic arbitrage to my advantage. I currently live in Thailand, where I'm making my early retirement dreams come true. I write and coach so that I can help others make their early retirement dreams come true.

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